Colorchips New Media Ltd Management Discussions.

Business Review:

The main focus of the Company is production of films, domestic productions in the space of theatrical, web, TV and launching channels on new technologies. The Company already owns Digital Channels. The Company has rich resources of IPRs.

Industry Structure and Developments:

The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making high growth strides. Proving its resilience to the world, the Indian M&E industry is on the cusp of a strong phase of growth, backed by rising consumer demand and improving advertising revenues.

The industry has been largely driven by increasing digitalization and higher inter-net usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people.

Indian media and entertainment (M&E) industry grew at a CAGR of 18.55 per cent from 2011-2017; and is expected to grow at a CAGR of 13.9 per cent to touch US$ 37.55 billion by 2021 from US$ 22.75 billion in 2017. The next 5 years will see digital technologies increase their influence across the industry leading to a sea change in consumer behaviour across all segments. The entertainment industry is projected to be more than US$ 62.2 billion by FY25.

The Indian Media and Entertainment industry is on an impressive growth path. The industry is expected to grow at a much faster rate than the global average rate. The Indian Digital media has grown significantly over the past few years, and continues to lead the growth charts on advertising. Subscription revenues are emerging and are expected to make their presence felt by 2020. In 2017, digital media grew 29.4% (27.8% net of the impact of GST) on the back of a 28.8% growth in advertising and a 50% growth in subscription. Subscription, which was just 3.3% of total digital revenues in 2016, is expected to grow to 9% by 2020.

Digital leading growth: The intensity of competition has increased in the digital music streaming space. There were two new launches in the Indian market this year Spotify with a high decibel marketing push, and YouTube music services. Both of these launched with a subscription model. These along with the current incumbents (Gaana, Saavn, Apple Music, Wynk, Amazon Music), have made the music streaming business cluttered. Most of these players are using the Music streaming business as loss leaders for their other products.

Outlook:

The advent of large OTT platforms in In-dia such as Google, Netflix, Amazon, Eros Now, Jio Cinema, etc, apart from OTT offerings of various Telecom companies, has significantly increased the demand for films digital rights. The sudden surge in demand especially the demand for exclusive rights, has resulted in a significant increase in the value of digital rights, which as per industry estimates have increase multi-fold (depending on the length of the deal and type of rights acquired) over the last two to three years. Digital revenue generated INR 8.5 billion for the film segment in 2017 an increase of 40% over 2016.

Online video viewing: 250 Million people viewed videos online in 2017, a growth of 64% over 2016. Consumer has shown increased preference towards short form content, with the average length of video viewed being around twenty minutes. In addition, 62 % of the content consumed on you tube is short-form content. Trends in online searches in India suggest that entertainment is becoming the largest sought after category, contributing to 31% of all searches.

Unlike the era of television, where must provide regulations force a broadcaster to share content across all platforms who demanded it, no such laws exist India for Digital Media. This has enabled OTT platforms to bid for and acquire content which is exclusive and not available on other platform, or even television. Such content covers originals from Netflix and Amazon Prime, as well as a new trend of direct to digital movies such as Love per square foot.

With these upcoming and constantly growing key trends, it is quite explanatory that the Digital Media industry in India has gained considerable impetus in the past years and definitely there is an ever increasing graph ahead in the future. Growth and progress are always marked with milestones thus, if the existing challenges are tackled with wise measures then the pace of growth can be fastened with no paramount hurdle in its way.

Internal Control System and their adequacy:

The Company through its management is responsible for establishing and maintaining adequate internal control over financial reporting commensurate with its size and nature of business. Our internal control systems are effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with the generally accepted principles of accounting. The internal control systems provide for well-defined policies, guidelines, authorizations and approval procedures.

Opportunities:

The way in which we consume news and entertainment has changed dramatically over the past decade, creating both challenges and opportunities for traditional broadcasters. Think about it: Millennials spend more time streaming content than watching it on television, and more than 20 percent of them are viewing shows on their mobile devices.

The following are the opportunities: The rising interest in shorter forms of content such as serialized web and YouTube segments that are a mere six to ten minutes in length.,

Content creators have a relationship with the end consumer like never before and derived insights about users allow for content and ads to be more personalized.

Companies that can figure out how to push discovery of their content to consumers or help them discover it for themselves will have a leg up in this competitive space.

Threats:

1. Competition from other countries like Taiwan, Philippines, Korea and China

2. Ever changing technology

3. Lack of awareness in foreign countries

4. Inadequate funding for capex and investment in manpower

5. Lack of support from government.

Challenges, Risks and Concerns:

Digitization forms a new business frontier, with geographical barriers to trade in Asia being leapfrogged by technology. The rapid growth of both domestic and cross-border e-commerce, and particularly smartphone-focused mobile commerce (m-commerce) has created real-time access to previously inaccessible markets across Asia. It has also catalyzed entire new business models and value chains, and added speed and dynamism to both B2B and B2C procurement processes. As a result, individual entrepreneurs and tech start-ups as well as regional and multinational firms can utilize a multiplicity of channels to interact with existing, newly acquired and prospective customers and clients at any time of the day or night.

But the catalytic impact of digitization also brings unique challenges. Cutting through the cluttered desert of data engages the regions brightest analytical and marketing minds, while cross-border trading and trading in untapped areas within the same country can create unexpected logistical, distribution and after-sales service challenges.

As a result, the quest to seamlessly manage digital and traditional channels is becoming more complex and more resource-intensive, and choosing a specialist Market Expansion Services partner to help deliver real competitive advantage is a critical business decision.

Discussion on Financial Performance with respect to Operational Performance:

During the year under review the Company has achieved a turnover of Rs.4,87,50,368/-, profit / loss after tax for the current financial year was Rs.(6,31,703)/-.

The paid-up capital of the Company as on March 31, 2019, is Rs.17,00,99,000/- comprising of 1,70,09,900 equity shares of Rs. 10/- each.

Human Resources Development and Industrial Relations:

The Company firmly believes that Human Assets are more critical than physical and financial assets as they are the ones who manage and sustain the growth of physical and financial assets of the company. The Company is well on its way in establishing an integrated system of workforce, which endeavors to develop the capability of its employees that clearly aligns with the business objectives and performance.

Further, we also encourage individual and team awards to sustain and institutionalize the various workforce practices. This helped in giving lots of encouragement to the workforce who have been striving hard to achieve various goals.

Cautionary Statement:

Statements in this Management Discussion and Analysis describing the Companys objective, projections, estimates and expectations may be ‘forward looking statements within the meaning of applicable laws and regulations. Certain observations made on the industry and other players also reflect on opinion by the management and the management accepts no liability on such opinions. Actual results might differ materially from those either expressed or implied.

FOR AND ON BEHALF OF THE BOARD

SD/- RAMABHOTLA SRINIVAS

CHAIRMAN & MANAGING DIRECTOR

DIN: 00027816 September 04, 2019 Hyderabad